Investing

Key Concepts:

Terms in this set (32)

Rate Of Return
The ratio of money gained or lost on an investment relative to the amount of money invested; also known as return on investment (ROI).
Security
A financial asset, such as a stock or a bond, that can be bought and sold in a financial market
401(K) Match
An employer contribution made to their employees' 401(k) plan based on individual employee's contributions
401(k) Plan
A retirement savings plan, sponsored through your employer who will often match your contributions, that allows an individual to save for retirement and have the savings grow while deferring taxes until funds are withdrawn
Bond
A security in which the investor loans money to a company or government, which then pays regular interest to the bondholder and returns the principal on the bond's maturity date
Bond Rating
A measurement of the likelihood that a bondholder will be paid back
Capital Gain
Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for
Coupon
The annual interest payment on a bond, usually expressed as a percentage of its face value
Diversification
The practice of investing in a large variety of stocks, bonds, and/or funds as a way to as a way to reduce your overall risk
Dividend
Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis
Dollar Cost Averaging
The practice of putting a fixed amount into an investment over a period of time, regardless of the price of that investment
Dow Jones Industrial Average
An index that tracks the stocks of a set group of 30 large, well-established, financially sound companies that are leaders in their industries
Index Fund
A low-fee portfolio of stocks chosen to track or mimic a stock market index, thereby removing the human element of investing because no one is choosing the individual stocks
Individual Retirement Account (IRA)
An investing tool for individuals to earmark funds specifically for their retirement
Initial Public Offering (IPO)
The first time a company becomes publicly traded by issuing stock that may be bought and sold on the market
Large Cap Stock
A stock with market capitalization over $10 billion
Market Capitalization
Market value of a company's outstanding shares calculated by multiplying the current share price by number of shares outstanding
Mid Cap Stock
A stock with market capitalization over $1 billion and less than $10 billion
Municipal Bond
A bond, often having tax advantages for individual investors, issued by a state or local government which typically uses the loan to pay for public works to benefit its citizens
Mutual Fund
A collection of stocks and/or bonds combined into one fund which will be traded as a unit, typically chosen and actively managed by an "expert" in exchange for a fee from each investor
Nasdaq
The second largest stock exchange in the world behind the NYSE
New York Stock Exchange (NYSE)
The world's largest stock exchange, physically located in New York City, with its 2800 traded companies valued at over $21 trillion (in 2017)
Pension
A retirement account, offered in some job sectors or companies, that an employer maintains to give an employee a fixed payout at retirement
Roth IRA
An individual retirement account that allows a person to set aside after-tax income up to a specified amount each year
S&P 500
An index of 500 large cap companies chosen based on their size, industry, and other factors, used to represent the entire market
Small Cap Stock
A stock with market capitalization between $300 million and $1 billion
Social Security
A federal program that provides monthly benefits to millions of Americans, including retirees, military families, surviving families of deceased workers, and disabled individuals
Stock
A share of the value of a company, which can be bought, sold, or traded as an investment and which gives the investor small partial ownership of the company
Stock Exchange
A market where shares in corporations are bought and sold through an organized system
Treasury Bond
A bond, generally considered to be a risk-free investment, issued by the U.S. Treasury with a maturity of more than 10 years
Traditional IRA
An individual retirement account that allows a person to set aside pre-tax income up to a specified amount each year
Risk
Degree of uncertainty on how likely the investor is to make money on an investment
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